Forget what you’re hearing about Facebook (Nasdaq: FB) fatigue. More of us are using the social network than ever before -- 955 million monthly, at last count. If only profits were rising, too.

They aren’t and, yet, Facebook still managed to beat Wall Street’s expectations for revenue growth while meeting earnings estimates in its first-ever quarterly report as a public company:

Metric Estimate Actual Last Year Y-o-Y Growth
Revenue $1.15 billion $1.18 billion $895 mil. 32.3%
Adjusted EPS $0.12 $0.12 $0.12 0%

Sources: Yahoo! Finance, Facebook press release.

Investors aren’t thrilled with the performance, and understandably so:

  • After three years of generating hundreds of millions in free cash flow, Facebook is back to burning cash to fund growth. The social network consumed $171 million in net capital in Q2.
  • Average Revenue Per User, or ARPU, a key metric that describes how well Facebook is monetizing its massive user base, rose just $0.02 to $1.28 per user.
  • In what seems to be a nod to cloud computing peer, share-based compensation (read: employee stock options) accounted for $1.1 billion of Facebook’s $1.93 billion in second quarter operating expenses.
  • Finally, payments and other fees brought in just $192 million in revenue during the quarter, essentially flat from last quarter and the quarter prior. All of which explains why Zynga (Nasdaq: ZNGA) fell so far short of Q2 estimates.

Earlier this month, I predicted that Facebook would disappoint. But not because of missing profits or elusive cash flow. Rather, I said that an exodus of unique visitors could damage the social network’s efforts to make good on Wall Street’s revenue targets. I was wrong.

As it turns out, Facebook has proven as adept as Google (Nasdaq: GOOG) at milking relationships with its advertisers. Good thing, too, given Zynga’s shrinking contribution to the profit pie. Longer term, everything -- and I do mean everything -- depends on Facebook’s ability to better target ads.

Do you agree? Disagree? Either way, Facebook is but one of many companies embracing the shift to the online world, creating a trillion dollar opportunity for the Rule Breaking investors who buy in early. Want details? Find everything you need in a new online special report -- it’s 100% free for a limited time so check it out now.